Representing the 2nd District of Alabama

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Minimum wage changes could close restaurants at military installations, Alabama lawmakers say

April 15, 2014

Representative Roby In The News

Two Alabama lawmakers are among those calling on the Labor Department to exempt some operations on military bases, including fast food operators, from recent changes to minimum wage regulations.

In an April 10 letter, Reps. Martha Roby, R-Montgomery, and Bradley Byrne, R-Mobile, joined 38 other lawmakers in asking that programs operated by military morale, welfare and recreation and exchange operations be exempted from recent changes to minimum wage requirements for federal contractors.

"Should (the minimum wage) policy changes be fully implemented, we are concerned they will eliminate jobs, negatively impact recreational services on military bases, and limit the dining options for servicemen and women on military installations," lawmakers wrote.

The letter comes as McDonald's announced it would close locations at three Navy bases and one Marine base. Another restaurant, "I Love Country," has closed at Naval Station Pearl Harbor in Hawaii. Military Times reports two other contractors, a sandwich shop and pizza parlor, are seeking to be released from Army and Air Force Exchange Service contracts.

So far, no restaurants at Alabama military installations have announced closures.

Minimum wage changes

In February, President Barack Obama signed an executive order raising the minimum wage for those working on government contracts from $7.25 to $10.10 an hour. While experts said the increase - which won't take effect until 2015 and only applies to new contracts - would only change pay for about 10 percent of the 2.2 million federal contract workers, a large percentage of those seeing a pay raise are those working at fast food restaurants.

A January study showed 74 percent of employees working in the food service industry under federal contracts earn less than $10 an hour. That means restaurants operating on federal contracts at military installations will now be required to pay higher wages.

The minimum wage rule also requires new "health and welfare" benefits of $3.81 per hour. That will bring the total cost for federal contract employees, including those working at fast food restaurants, to $13.91 per hour.

Navy and Marine Corps exchange officials said those increases could force widespread closures of fast food operators at military installations. In an April 8 letter from Russell Beland, deputy assistant secretary of the Navy for military manpower and personnel, to the Labor Department, Navy and Marine officials estimated up to 390 fast food operations would close at military installations in the U.S. due to the wage changes.

Those cuts could result in a combined loss of about $27 million a year in profits, according to a report in Army Times, as companies that build and operate restaurants on military installations make payments to the exchange systems. And, as lawmakers noted in their letter, the restaurants are prohibited from raising their prices to make up the difference.

"Price increases are not allowable under most contracts because they cannot charge more for similar services within a specified radius of a military installation," the lawmakers wrote.

Lawmakers said the restaurants provide much-needed funds to MWR programs as well as jobs and convenience for military personnel.

"Contracted operations for fast food and other services are a key aspect of these operations and provide much needed and desired services for our military personnel while generating tens of millions of dollars to underwrite vital community support programs," lawmakers said.